Already a member?

Boeing Revs Up Production Rate Of 787s With Third Assembly Line

Boeing (
BA
) has started a third assembly line for the 787 Dreamliner to
increase the production rate under the program, which is running
well behind its original delivery schedule. The current firm
orders for 787 exceed 800 while the cumulative 787 deliveries stood
at a mere 14 at the end of the quarter ending June 30,
2012. The delay in deliveries has also hit the company's
margins as it has been forced to pay delay compensations to its
clients. Thus, the new assembly line will not only increase
deliveries of 787, adding to growth in top-line over the coming
quarters, but also reduce the impact on margins through lower delay
compensations.

This third assembly line for the 787 is located at Boeing's main
jet plant facility at Everett, Washington, adding to an already
existing 787 assembly line at the same facility and another
one at North Charleston, South Carolina, which rolled out its first
plane in April earlier this year. The current production rate from
the two operational lines stands at 3.5 planes per month and, with
production starting on the third line, the company aims to increase
this to 5 planes per month by the end of this year. Boeing finally
aims to take the rate of production for 787 to 10 planes per month
by the end of 2013.

The step was a much needed one

The additions of an assembly line to the 787 program was a
much-needed step, as the number of unfulfilled 787 orders are
exceeding 800 at present, while cumulative deliveries under the
program stood at a low of 14 at the end of last quarter. The
delivery schedule under the program is running much behind its
original plan, as the first 787 entered service in September last
year, nearly three years after its original schedule. These delays
in delivery have forced the company to pay compensation to its
customers who are receiving orders post their original delivery
dates. For example, Air India recently accepted compensation
offered by Boeing on the delay in delivery of 787, and the
Sydney-based Qantas Airways announced last week that it is to
receive $433 million in delay compensation and deposit return from
Boeing after the former cancelled an order of 35 787s. Thus,
these delay compensations are impacting the overall margins of the
company.

However, as the rate of production rises with the third assembly
line, the higher number of 787 deliveries over the coming quarters
will not only add to the company's top-line growth but also reduce
the impact on its margins by saving on delay compensations.

Please note that once you make your selection, it will apply to all future visits to NASDAQ.com.
If, at any time, you are interested in reverting to our default settings, please select Default Setting above.

If you have any questions or encounter any issues in changing your default settings, please email isfeedback@nasdaq.com.

Please confirm your selection:

You have selected to change your default setting for the Quote Search. This will now be your default target page;
unless you change your configuration again, or you delete your
cookies. Are you sure you want to change your settings?